A recent Texas Supreme Court case, Allen-Pieroni v. Pieroni, teaches that the proper measure of damages for a slander of title suit is the difference between the lost contract price on the property and the fair market value when the slanderous cloud on title is removed.
Texas Slander of Title: Facts of Case
Marc Pieroni was married for 10 years to Bonnie Pieroni. When they divorced, Mr. Pieroni (“Marc”) agreed to pay a total lump sum to the former Mrs. Pieroni (“Bonnie”) of $500,000 in $10,000 increments. Marc never failed to pay and was never in default of his obligations under the divorce decree. Ultimately, Marc paid Bonnie the entire $500,000 by August of 2013.
Shortly after the divorce in 2009, Marc bought a home. Unbeknownst to him, Bonnie filed a Judgment Lien against his new home with respect to the $500,000 divorce decree award.
Several years later, in March of 2014, Marc was in the process of selling the home and asked Bonnie to release her lien (since the full amount had already been paid by 2013). Bonnie refused. As a consequence, the sale fell through. Because Marc had signed a purchase contract on another house, Marc ended up owning two homes, carrying two mortgages and one of the homes stood vacant for seven months while he tried to find a tenant.
Marc sued Bonnie for slander of title in May 2014 and was awarded $98,438 and attorney’s fees. The trial court made a specific finding that Bonnie had acted maliciously in refusing to provide a release of her judgment lien.
The Court of Appeals upheld the verdict but reversed on the award of attorneys’ fees. In general, title-related cases do not allow attorneys fees. See Allen-Pieroni v. Pieroni, No. 05-15-00774-CV, 2016 WL 4039192 (Tex. Civ.App.-Dallas 2016, pet. filed) (claim for slander of title does not support award of attorneys’ fees); and see also I-10 Colony, Inc. v. Lee, 393 S.W.3d 467, 475 (Tex.Civ. App.-Houston [14th Dist.] 2012, pet. denied) (attorneys’ fees not recoverable on trespass to try title claim).
The Texas Supreme Court reversed the judgment for Marc and held that the trial court did not properly calculate the measure of damages awarded to Marc.
Texas Slander of Title: Measure of Damages
The trial court awarded Marc damages based on the following formula: the contract price on the lost sale ($285,000) minus his mortgage balance ($205,000) at the time (May 1, 2014). The remaining $18,000+ in damages were Marc’s other consequential damages related to lost rental income, having to carry two mortgages and other incidentals. Those damages were not at issue in the appeal.
The Texas Supreme Court disagreed with the award of the $80,000 difference between the lost contract and Marc’s mortgage balance. The Court stated that the proper measure of damages was this: “… in a case in which the plaintiff still owns the property at the time of trial, the amount of actual damages caused by the slander is generally the difference between the contract price (the amount the plaintiff would have received but for the defendant’s title disparagement) and the property’s market value at the time of trial with the cloud removed.” Because the wrong measure of damages was used, the case was sent back to the trial court for a hearing using the correct measure of damages.
The practical effect: If Marc’s house has increased in value — if the housing market is “up” — then he may not recover any damages related to the value of house.
Texas Slander of Title: Case Comments And Thoughts
I think I understand the Court’s reasoning, but I have trouble with the outcome, especially where a defendant’s refusal to remove a cloud is clearly malicious. In an “up” market, the provable damages will be meager at best. Since attorneys’ fees are unavailable and the damages will be small, there will be little incentive to agree to remove liens and other clouds on title.